A Victorian-era jail taken over by the world's largest security firm as a trailblazer for greater private-sector involvement in the country's prisons has been criticised for overcrowded conditions and a lack of protection for vulnerable prisoners.

In the first independent scrutiny of Birmingham prison since G4S took over control in October 2011, inspectors found that packages of drugs were regularly being tossed over the walls and the authorities had failed to put nets up to stop the problem.

The inspection – headed by chief prisons' inspector Nick Hardwick – found prisoners sharing small cells and eating food in them close to poorly screened toilets.

It found vulnerable prisoners felt threatened from other inmates who pushed razor blades into their cells and spat through gaps in their doors.

However, the inspectors said there had been improvements, with the use of force by staff dropping significantly and relationships between prisoners and officers generally good.

Private companies operate other newly built prisons but Birmingham prison was seen as a test of the sector's ability to run an old jail.

G4S said it was going to put up nets to stop drugs getting into the prison. It said it was "delighted" Mr Hardwick thought the prison a "safer place".